As we near the middle of January 2009 many of us find our New Year’s resolutions slipping away as they always do. For many of us it is just something we do on New Year’s Eve and then hope we remember it on New Year’s Day and then continue it. For many of us it is the usual resolutions of start dieting to lose weight, stop smoking, drink less, find a new job, get divorced, live a healthier life, be happy, save money and consult a money saving expert for help. Crickey how did he slip in here!
The Financial Times reported that new research commissioned by the ABI showed that almost fifty percent of British consumers had made this New Year’s resolution to start saving more money for the future. Most of these people have made this resolution given the current economic conditions and their fear for the future. 1,040 British adults were surveyed by Populus during December 2008 and 47% of them said their New Years resolution would be to save more. 51% of those surveyed also said that the current economic conditions made it more likely that they would resolve to save more.
All this comes at a time when Gordon Brown and Alistair Darling are asking the British people to go out and spend, spend and spend some more; so that we can spend our way out of debt. This is difficult for us to do as all we hear about is thousands of people losing their jobs, the pound falling against the US dollar and the euro, the value of bank share free falling, etc. To compound the situation we have twenty-four televised news broadcasts giving all of us an hourly injection of gloom and doom.
It astounding, why so many people have made New Year’s resolution to start saving more money for the future. Interest rates are below 1% and those savers with over £50,000 have had to split their savings between different savings accounts. This should be done in order to protect their savings should the bank or building society go bust. They would then be covered by the governments deposit guarantee scheme for British savers in the UK.
If your New Year’s resolution is to start saving more money for the future then you need to be applauded and encouraged to do so. As a Money Saving Expert I should warn all newly converted savers that you are getting a raw deal with your saving accounts at present. Savers with mortgages would do better to overpay their mortgages which they are paying 5% or 6% per year compared with the measly 1% or less from their savings accounts. By overpaying your mortgage you would not pay income tax on your earnings from your savings account. Any money that you overpay your mortgage with will immediately start to reduce the term of your mortgage thereby saving thousands of pounds over the remaining term of the mortgage. Overpaying your mortgage is risk free and tax free.
Ask your mortgage lender how much you can overpay your mortgage without being penalised and if you can withdraw any of the overpayments you make. This is important if you want to have access to this money in the future. If you need to be able to withdraw the money deposited in the future and your lender will not allow you to then you need to look at other alternative saving vehicles, like ISA as they are tax free, risk free and they allow you access to your money in the future but the interest rates at present are poor. You may decide to remortgage to a new mortgage lender that will allow you to overpay, underpay your mortgage and take payment holiday breaks from your mortgage.
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